Saturday, February 27, 2016

Unemployment Claims … Durable Goods … GDP … Spending & Inflation … Stock Market Analysis

“The number of Americans filing for unemployment benefits rose last week but remained below levels consistent with a tightening labor market…
…New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up broadly, offering a ray of hope for the downtrodden manufacturing sector.” Story at…
“Gross domestic product increased at a 1 percent annual rate instead of the previously reported 0.7 percent pace. The economy grew at a rate of 2.0 percent in the third quarter.” Story at….
“U.S. consumer spending rose solidly in January and underlying inflation picked up by the most in four years, keeping Federal Reserve interest rate increases on the table this year. The Commerce Department said on Friday consumer spending increased 0.5 percent as households ramped up purchases of a range of goods and the return to normal winter temperatures boosted demand for heating.” Story at…

-Friday, the S&P 500 was down 0.2% to 1948 at the close.
-VIX rose about 4% to 19.81.
-The yield on the 10-year Treasury dipped slightly 1.74%.
-The S&P 500 is 0.2% above the 50-day moving average (dMA) and 4% below the 200-dMA. It would be very bullish if the Index can break above its 200-dMA.
-The Overbought/Oversold Ratio remained “Overbought” Friday for the fourth day in a row.  This has been a trouble point for the markets recently. Now it is an extreme value – that last time it was this high was 31 December 2014 and the index promptly fell 100 points.
- I am waiting to see if the charts will resolve. The SP 500 has climbed back to a line of resistance at 1950 where the old bottom of the uptrend channel is climbing from its Dec 2011 low.  1950 is also the upper trend line of the declining short term trend for 2016. So trend wise, this is a junction of buying and selling.  Bullish trends will be signaled if the Index can get significantly higher. Which way will it go?  Both long and short-term indicators have been improving; if that continues, perhaps this downtrend will end.
I’ve been saying that the short-term Money Trend indicator looks like it is topping, but it hasn’t yet.   It was still headed up as of Friday’s close.  It has reached a level that has been trouble in the past, but I only have about a year of data on this indicator.
I still am holding short positions in SH and QID.
(I am getting data from various sites. Some of the numbers are subject to minor revision so the previous day’s numbers may be slightly different than reported yesterday.)
The 10-day moving average of the percentage of stocks advancing (NYSE) is 65.5% Friday vs. 61.1% Thursday. (A number above 50% is usually GOOD news for the markets. On a longer term, the 150-day moving average of advancing stocks improved to 49.5%. A value below 50% indicates a down trend. The McClellan Oscillator (a Breadth measure) improved and remained solidly positive.
In a bullish reversal, New-highs outpaced New-lows. The spread (new-highs minus new-lows) was +25 Friday. (It was +50 Thursday.)   The 10-day moving average of the change in spread slipped to +70. In other words, over the last 10-days, on average; the spread has INCREASED by 70 each day. Market Internals (based on 10-dMA) are positive on the market, but perhaps too positive - The last time the 10-dMA of the % of stocks advancing was higher than today, Wednesday, was on 31 December 2014.

Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting).  Of course, few trend-following systems will do well in an extreme low-volatility, nearly straight-up year like 2014.

Friday, Price & Volume were positive; VIX was negative; & the Sentiment indicator was neutral. The long-term NTSM indicator is BUY, but until the charts and VIX indicator are resolved I am going to watch and wait. 
On 30 Dec I reduced my invested position in my retirement account to 30% invested in stocks thru an S&P 500 Index fund (“C”-fund in the TSP) and on 15 Jan I reduced stock allocation to zero in long-term accounts.
The S&P 500 peaked in Mid-May and has not been able to break higher in the past 9-months. That looks like a top to me. See “Why the Bull Market May be Dead” in my 14 December blog at…